Bill Gates makes the (bogus) case for more (cheap) foreign labor

Gates goes on the warpath against quotas that restrict his company's use of …

In an op-ed in yesterday's Washington Post, Microsoft Chairman Bill Gates argues yet again in favor of raising the cap on H1-B foreign worker visas from its present number of 65,000. Gates' basic argument boils down to this: fewer students at American universities are opting for computer science degrees, which means that we need to raise the H1-B cap so that the software industry can import more foreign labor to fill those jobs that Americans—for whatever reason—don't seem to be equipped for.

Of course, the fact that the importation of cheap foreign labor into the software industry job market hampers American programmers' ability to compete and leads to depressed wages overall is never mentioned by Gates as a major reason why a computer science degree just isn't that attractive any more to Americans. Who wants to spend four or five years getting a CS degree, only to be priced out of the job market by foreign programmers who are willing to work for less in exchange for a green card?

But Bill Gates would vigorously dispute my assertion that Microsoft pays its H1-B workers any less than they pay American workers to do the same programming job, and indeed a big part of Gates' case for raising the cap is built on his claim that H1-B workers are paid the same salaries as American workers. Unfortunately for Gates, that particular claim, which he himself has made in the Washington Post before, is falsifiable.

Gates' H1-B flap

In March of last year, Washington Post columnist David Broder interviewed Microsoft Chairman Bill Gates on Microsoft's efforts to persuade Congress to raise the cap on the number of H1-B visas that the government grants to foreign workers. Like many large companies in the tech industry, Microsoft would like to be able to hire more workers through the H1-B program, ostensibly because of a grave shortage of technical talent here at home.

In the interview, Broder reports that Gates made the following claim about the salaries of Microsoft's H1-B hires: "As Gates said, these [H1-B workers] are highly paid, highly qualified individuals. Salaries for these jobs at Microsoft start at about $100,000 a year."

This indirect quote, and the column from which it's drawn, went largely unnoticed until earlier this month, when a cross-post about the column appeared at the popular progressive blogs MyDD and DailyKos before being picked up in this blog entry at Networkworld. The post, written by Robert Oak, the anti-outsourcing activist behind NoSlaves.com, attempted to refute Gates' apparent claim that H1-B salaries at Microsoft really do start at "about $100,000 a year." The argument that Oak went on to make is that Gates flat-out lied to Broder about the salaries that Microsoft pays H1-B workers in an attempt to cover up the alleged fact that Microsoft is backing higher H1-B caps solely so that the company can import more cheap foreign labor. There is no shortage of American computer talent, argue Oak and other outsourcing and H1-B opponents—American companies like Intel and Microsoft just want to hire foreigners because they can pay them less.

Let's take a closer look at what Oak argued, and at Microsoft's response to Ars regarding questions about Gates' comments.

A closer look at Microsoft's H1-B salaries

Oak began his refutation of Gates' claim with the assumption that Microsoft's foreign worker hiring practices are just like those in the rest of the software industry, i.e., a tech company makes a non-citizen a job offer under the H1-B program, and the company also promises to sponsor the new hire for a green card if he or she takes the job. The H1-B program, then, is pitched to foreign workers as a path to a much-coveted green card, and to the permanent-resident status that a green card confers.

Whenever Microsoft submits a green card application on behalf of a worker, the company is required by law to publish that worker's salary. So a colleague of Oak's, Dr. Ron Hira, did an analysis of Microsoft's published green card data in Excel. Hira found that only 3.3 percent of the company's green card applicants were being paid $100,000/year or higher at the time their applications were submitted to the program. The rest earned below $100,000/year, with a substantial number of them earning significantly below that number.

Oaks contends that this analysis of Microsoft's green card data proves that Gates lied to Broder about the company's H1-B salaries, in order to perpetuate the myth of an American tech talent shortage and to mask the real reason why Microsoft wants to be able to hire more H1-Bs.

So did Gates lie to Broder?

For Gates to be a liar, then two conditions would have to be met.

Broder's indirect quote would have to faithfully reflect a claim made by Gates. In other words, we have to believe that David Broder didn't somehow make up this salary claim and then attribute it to Gates.

Oaks' initial assumption that most or all of Microsoft's green card applicants are currently working for the company through the H1-B program would have to be correct.

Regarding condition #1 above, I asked Microsoft if the company would vouch for the accuracy of Broder's characterization of Gates' comments. A Microsoft spokesperson replied with the following statement:

The need to attract and retain talent is vital. The positions we seek to fill are for those with the highest levels of skill available and for which there are no U.S. candidates. Competition for that talent is global and intense. As we highlighted in a letter to Congress last year, "The H-1B program has strong wage requirements and other protections for U.S. workers. Moreover, Microsoft compensates its H-1B workers at the same high levels as U.S. workers, and at levels substantially above the government set "prevailing wages" for each occupation (although some critics have confused the 'prevailing wage' level for what Microsoft actually pays its employees), for example:

Software Development Engineers averaged over $109,000 in total direct compensation in 2005.

Program Managers averaged over $110,000 in total direct compensation in 2005."

This isn't exactly an iron-clad statement from Microsoft that the company pays its H1-B hires $100,000/year or more, but it does reiterate the company's standard claim that it pays its H1-B workers more than the prevailing wage for each position. I'll take it as a de facto confirmation of the substance of Gates' reported remarks, even if it doesn't explicitly affirm their specifics.

I also asked Microsoft about point #2. Specifically, I asked what percentage of Microsoft's green card applicants were enrolled in the H1-B program at the time that they applied for a green card. The company got back to me with the following response:

We hire H1-Bs with a view to making them permanent U.S. residents (i.e., getting them green cards) but Federal Government processing delays and the overall lack of green card availability for high skilled workers means that we?re only able to turn-over about 20% of our H1B hires into green card holders annually—this backlog has created opportunities for foreign competition to lure talent away from Microsoft and other U.S. companies because our immigration system makes it impossible for these high skilled individuals and their families to stay in the U.S..

This statement makes it pretty clear that Microsoft has a typical view of the H1-B as a path to a green card, which means the vast majority (if not all) of Microsoft's green card applicants—only 3.3 percent of whom make more than $100,000/year—are working for the company on an H1-B visa. So it looks like Gates "misspoke himself," to use a favorite Beltway euphemism, when he told Broder that Microsoft's H1-B workers start at $100,000 a year.

Postscript: Criticisms of the H1-B program

One major criticism of the H1-B program has been that it's a source of cheap labor for the tech industry. Some companies would rather hire an H1-B worker who'll work for a lower salary in exchange for the promise of a green card than hire an American worker at the prevailing wage. My own past reporting on the impact of the H1-B program put the problem as follows:

Importing foreign labor via the H1B visa program is a fantastic way to boost American competitiveness if there's a real shortage of expertise in the American labor market. If there isn't a real shortage, then it's strictly a way for American companies to bring in cheap labor at lower wages by dangling the promise of a green card in front of potential hires. This kind of activity exerts a downward pressure on wages across the entire field and ultimately prices American labor out of the market.

In the rest of that post, I develop the above argument in more detail, and provide an example of what I'm talking about. So if you want to learn more, then that post is a good place to start.